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“A Labour government would ensure sales were declined unless potential foreign buyers of farm or forestry land also invested in new processing or other related jobs. ” Source

Sorry, Mr Goff, but that is totally unacceptable and is merely ‘tinkering’ with the problem.

The sale (or leasing) of our productive farmland means that we lose profits to overseas investors. It means that a foreign owned farm will (a) export their produce (b) make a profit (c) remit much of that profit back to overseas investors, who look for returns on their investment.

It means that New Zealand farmland is priced out of reach of our own people, who cannot hope to compete with Americans, Germans, Chinese, etc. The purchase of the Crafar farms by Shanghai Pengxin’s over a Michael Fay-led local consortium should ring alarm bells in our heads. (More here)

Labour needs to lift it’s game on this issue.

There has to be a total ban on the sale/lease of farmland to anyone who is not a New Zealand citizen. Anything less will ultimately undermine our long term prospects for wealth-generation and prosperity.

I should start with a disclaimer: I hold no real enthusiasm nor liking for Michael Fay’s method of operation. He and his colleague, David Richwhite, gutted NZ Rail during their tenure as part-owners of that asset. (The New Zealand Securities Commission investigation into Fay & Richwhite’s alleged insider trading – and whilst no prosecution resulted – did result in an out-of-court settlement, where they paid NZ$20 million to the Securities Commission in June, 2007. )

As taxpayers, we are still paying for the upgrading and maintenance of railways that was neglected during 15 years of private ownership.

However, the reality is that Michael Fay is leading a New Zealand consortium to buy the 16 Crafar farms. These farms amount to 11,000ha of property throughout the central North Island. Their transfer into foreign control would be a significant loss to the NZ economy.

There are three major issues highlighted by this story, and another, that convincingly illustrate why overseas investors should be permanently denied ownership (or even leasing) of our productive farmland.

Issue 1:

“Receiver KordaMentha has formally declined the Fay group’s $171.5 million offer for the 16 central and lower North Island farms, saying the conditional offer it has accepted from Chinese group Shanghai Pengxin “was by far the best offer at [that] time and remains so today”…

… “Our offer is at a price we firmly believe makes sense it that we are paying the right price for the long-term farming future of these properties,” the group’s negotiator Steve Bignell said. “Source

This illustrates the risk of permitting foreign interests to bid for our farms. Foreign investors (generally) have very, very deep pockets. When even a millionaire such as Michael Fay can be out-bid – we need to ask ourselves how ordinary New Zealanders can compete with foreign investors.

In a bidding war, New Zealanders will always lose. Our sons and daughters have zero chance and nil opportunities to own a slice of our country’s natural wealth, when faced with the near-limitless resources from overseas buyers.

We may not like Michael Fay, but at least he represents an opportunity to keep the Crafar farms – and the wealth they create – in local ownership. That he is unable to acquire these properties because he has been out-bid to the tune of $38.5 million dollars is disturbing.

If true, then the question that begs to be asked is: why? Why are overseas investors willing to pay inflated prices for our productive farmlands?

The answer is not very complicated nor obscure.

The human population on Planet Earth has reached 7 billion.

By 2050AD it is estimated that the population will reach 9 billion.

All 9 billion will require food – lots of it. And unfortunately for the Human race, there is only a limited amount of arable land on this little planet of ours. With ongoing desertification, arable land is reducing each year. Soil erosion is another factor in this problem.

On top of that, as populations increase, so does pressure on food supply. In countries such as India and China, as their middle classes grow and become more affluent, they will demand access to more and better food.

Countries such as New Zealand offer sources of clean, well-processed, safe, reliable, sources of protein.

In other words: supply and demand.

Just as the U.S. has cornered oil supplies in the Middle East, growing economies in the East and elsewhere will look to “cornering” nett-food suppliers. It is interestimng that the Prime Minister, John Key, alluded to this matter at a public meeting in Lower Hutt, on 24 May. He stated that China’s centralised, autocratic government could not afford to risk disruption to their domestic food production; a hungry population; and a subsequent “Arab Spring”-style uprising.

No government on Earth could withstand one billion hungry people in revolt.

Key hinted that China’s acquisition of land in Africa and here in New Zealand was based on a strategic need to secure food sources.

If true, money is no object. After all, you cannot feed money to hungry mouths.

In which case, it is little wonder that Shanghai Pengxin’s offer for the Crafar farms is “over a certain price level“. China is not interested in selling the food for profit. It is seeking the food for it’s own population. Because by 2050, one billion Chinese will have eight billion other competitors seeking the same food source.

This is what ‘Shanghai Pengxin‘ spokesman Cedric Allan said,

“… while it initially intends to continue supplying Fonterra with raw milk investment plans include working “in partnership” with an existing processor to develop baby formula, ice cream and cheeses suitable for Asian markets.

“We do not intend to be simply a customer of a dairy processor.

“To ensure the processor can produce long term and if they needed to increase their capacity to do so then we could help them with that.

“We have no wish to own or control a processor, other than to make sure they are in a position to provide surety long term.” “Source

Again, no individual New Zealander(s) can hope to compete against that kind of long-term acquisition-strategy.

Issue 3:

“Shanghai Pengxin has lodged its application with the Overseas Investment Office (OIO) to buy the Crafar portfolio after Natural Dairy’s application was rejected.” – 18 April 2011 Source

The OIO (Overseas Investment Office) usually takes between 30 working days (Category 1 applications) to 70 working days (Category 3 applications). Source.

It has been approximately 115 working days since Shanghai Pengxin lodged its application with the Overseas Investment Office.

(b) the OIO has been “requested” by the Minister-in-charge to “review” Shanghai Pengxin’s application. And to report back sometime after the election.

The sale of the 16 Crafar farms is politically explosive. It would do to National what “Corngate” did to Labour in 2002. National cannot risk this matter affecting their re-election chances in November.

Which is why I am betting that,

1. We will not see a decision from the OIO any time this year.

2. The Fay-led consortium will fail.

3. The Shanghai Pengxin application will be approved.

The sale of New Zealand will accelerate, and with the apathetic acceptance of the majority of New Zealanders.

Just how gullible are we?

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+++ Updates +++

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Source

Fay said the group of farmers had “serious concerns” about the state-owned farming corporation’s role with Shanghai Pengxin, whose bid for the 16 in-receivership dairy farms is conditional on getting Overseas Investment Office consent.

“Landcorp is well known in the farming community for buying farm land in competition with locals – effectively using taxpayers’ money to outbid those same taxpayers,” Fay said.

Fairfax revealed recently that Landcorp was in preliminary talks with Pengxin for the job of managing or sharemilking the farms if the Chinese company is successful in buying them.

It has been nearly seven months since Pengxin applied to the OIO for consent.

Fay said Landcorp seems to have become “utterly confused” about its purpose and could have allowed itself to be used as a pawn in the deal – “just to give the Chinese bids an acceptable local face”.

Fay’s group has offered receivers KordaMentha $171.5 million for the farms. Its bid has been declined as too low but the farmers consider their offer “still live”.

Through its OIA request, the farmer group has asked Landcorp to provide all details of its dealings and correspondence with Pengxin, any correspondence it may have had with the OIO, and all correspondence between Landcorp and an unsuccessful bidder for the Crafar farms, Chinese group Natural Dairy and May Wang’s UBNZ companies.

The farmers say they are making a single bid for the Crafar farms because the receivers require it, but if successful they would split the farms up between them to be owner-operated.

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The Big Questions that need to be asked here are;

Why is Landcorp – a State Owned Enterprise (SOE) – working with overseas interests rather than local investors and taxpayers?

Is this an acceptable use of taxpayers’ money and resources?

What is the government’s position on a SOE working with a foreign company, against New Zealand investors?

Has Landcorp offered to work with the Fay-led consortium? If not, why not?

Perhaps it is appropriate for these questions to be put to Landcorp’s Chief Executive, Chris Kelly, and Shareholding Minister, Simon Power?

According to recent media reports Landcorp “is in preliminary talks with Pengxin for the job of managing or sharemilking the 16 Crafar farms if the Chinese company ( Shanghai Pengxin) is successful in buying them.”

Landcorp appears to be supporting Shanghai Pengxin’s bid to purchase the Crafar farms over an offer by a local consortium, led by Sir Michael Fay.

Could you please explain how a New Zealand crown-entity – namely Landcorp, which is owned and resourced by New Zealand taxpayers – can appear to be supporting a foreign bid to gain control of large areas of productive New Zealand farmland; soliciting business from said investors; and thereby undermining a local bid?

Could you please explain how Landcorp can be associated with a foreign investor, instead of local investors, when their Objectives (2011-2014) specifically require Landcorp to be committed to;

“1.1

– To exhibit a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accomodate or encourage these when able to do so.

In view of the above stated objectives, it would appear to make better sense if Landcorp were to support the Fay-led consortium, rather than overseas interests. Considering that Landcorp is owned by New Zealand taxpayers, it seems to be a fair expectation that Landcorp support local investors rather than overseas individuals and/or corporations.

If and only if Pengxin have OIO approval to buy Crafar farms might Landcorp be involved in managing the farms.Land corps preferred option was to buy them ourselves.We would be happy to work with the Fay consortium.We have not been approached by them.Landcorp has not been in contact with the OIO to assist Pengxin to buy the farms.